Yesterday, I wrote that the financial crisis was over at the nation's largest banks. Earnings at major regional banks now appear to confirm that trend on a broader level.
|
Metric |
BB&T (NYSE: BBT) |
Fifth Third Bancorp (Nasdaq: FITB) |
PNC (NYSE: PNC) |
SunTrust Financial (NYSE: STI) |
|---|---|---|---|---|
| Q4 EPS: Consensus Estimate/ Actual |
$0.26/ $0.30 |
$0.24/ $0.33 |
$1.38/ $1.50 |
$0.23/ $0.07 |
| Total Loan Growth vs. Q3 (Ann.) |
+5.5% |
+1.5% |
(4.7%) |
+5.8% |
| Tier 1 Common Equity Ratio/ Improvement vs. Q4 2009 |
9.1% +60 bps |
7.5% +51 bps |
9.8% +380 bps |
8.1% +41 bps |
Source: Company press releases, Yahoo! Finance. Bps = basis points.
Four solid earnings beats -- not a bad result!
The same trends at work
Behind these numbers are the same drivers that banks like JPMorgan Chase (NYSE: JPM), US Bancorp (NYSE: USB) and Wells Fargo (NYSE: WFC) highlighted in their quarters. Of the four banks in our table, only one – PNC – didn't generate sequential loan growth in the fourth quarter. Meanwhile, improved credit quality is also chipping in, with declining non-performing loans across the board.
So long, Uncle Sam!
Another sign of the improved health of the banking sector: The continued repeal of the government's involvement as a shareholder. On Wednesday, Fifth Third announced that it will repay the government's TARP funds on the back of a $1.7 billion share offering. While the top banks have all repaid TARP monies, regional banks have been slower to do so. However, the four institutions above look reasonably well-capitalized at this stage; of the four, SunTrust is the only other bank not to have repaid TARP, and it said today that this is a priority.
I still prefer megabanks
The businesses of regional banks is much improved, and their shares don't look expensive on the basis of book value multiples. Still, they lack the diversification and dominant franchises of the top four banks, which is why I prefer that basket. Either way, these results are further evidence that the U.S. economic recovery is finally finding its footing, which can only be good for investors.
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